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Learning Corner with Jeffrey Pfeffer: What If You Couldn’t Easily Fire People?

Jeffrey Pfeffer

Professor of Organizational Behavior, Stanford University

The recent publication of Buckingham and Goodall’s Nine Lies About Work brought home some painful facts about people management for me. First, the state of people management remains poor. Gallup recently reported, for instance, that the U.S. quit rate is at an all-time high; 67% of employees are disengaged at work; and more than half say they are actively looking for a new job. Second, HR lacks a commitment to evidence-based people management (evaluating a decision or policy with evidence such as data and peer-reviewed scientific research to ensure the desired result is achieved).

As I thought about the HR practices that remain in use, notwithstanding the evidence against them—things like forced curve performance evaluations—it occurred to me that many of these practices stem from one root cause: the ability to fire employees at will. Because organizations can easily terminate people (and are very willing to do so), workplaces often use counterproductive management approaches that evaluate, rather than invest in and develop, employees.

Adopting a Growth Mindset

The U.S. is the only country in the industrialized world that has at-will employment, where people can be fired for any (or no) reason at all. In the rest of the world, you can only be fired for cause. According to the Bureau of Labor Statistics, about 1.5% of the workforce is fired or laid off each month, which means that almost 20% of the workforce will involuntarily lose their jobs each year.

And there is evidence that being fired is not a signal of incompetence, but possibly an organizational mistake. One 10-year study of some 2,600 executives found that of those who were fired, 91% found a job as good or better than the one they lost, and 78% eventually rose to become CEO. The idea that the solution to poor performance is termination produces numerous unproductive approaches to managing people.

Research by psychology professor Carol Dweck and her colleagues has consistently shown the benefits of adopting a growth mindset over an evaluating one. An evaluating mindset implies that, for instance, if a salesperson is not making their quota, that person can’t sell—is not a natural—and should be either fired or moved into a different job. A growth mindset, on the other hand, implies that if a salesperson is currently ineffective, that individual might benefit from training in sales techniques and coaching from sales leadership on what they are doing that could be improved.

As Dweck argues, implementing a growth mindset is easier said than done. There’s a great deal of effort required to develop talent through hard work, coaching and learning. If people are readily replaced, the temptation to fire them and find someone else can be overwhelming. In an ideal world, public policy would make it more difficult and costlier to remove people from their workplaces. But until that happens, if employers at least think of firing as a last resort, they’ll be more likely to work more diligently to develop everyone to their full potential.

Performance Reviews Perpetuate the Evaluation Mindset

Performance reviews (which managers don’t like giving and few employees want to receive) may be, in my opinion, the most detrimental HR practice when it comes to developing a growth mindset.

Evaluations presumably identify who needs to go on "performance improvement plans" and are used to rank people against each other. If firing people weren’t at the forefront of these reviews, HR managers might still want to provide developmental information, but it almost certainly would take a very different form. The conversation would focus on how the employee could improve and what the employer and employee could jointly do to develop that individual’s competencies, not the person’s "grade." And instead of being performed annually or every six months, developmental conversations would occur all the time.

An Argument Against Firing

Does firing even work? Consider this logic. Unless the company is downsizing, every person that’s fired needs to be replaced. Unless the company has somehow improved its selection process, or done something to become a more attractive place to work, the organization will just return to the same labor pool from which it drew the now-fired individual, with the same "deal," and draw again. What are the odds it will do better? That is why companies that fire people—and those that downsize—tend to do it again and again, because these actions do not solve anything.

Here's a useful analogy. Almost no parent has ever "fired" their child. When the child misbehaves or does not live up to their potential, great parents provide love, attention, guidance and high expectations, and work hard to ensure the best possible outcome for the kid. Wouldn’t it be nice if companies did the same? Instead of disposing of people, give them second, third, maybe even fourth chances. Invest in them. Provide them the social support necessary for physical and mental health, and the opportunity to do better.

We live in a world of untapped human potential. Fulfilling people’s promise requires a commitment to their development that the opportunity to simply get rid of them renders unlikely.

Photo: Creative Commons

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